Klrana: buy now, pay later

Leave a Comment / FinTech Division / By Thomas Tang

Overview – What is Klarna?

Klarna Bank AB (Klarna) is a fintech company founded in 2005, based in Sweden. It aims to make a more effortless and safer online shopping experience for its customers. Klarna now has more than 250,000 businesses globally with over 90 million active customers, becoming the second-largest firm in the world in just 15 years. The company has been operating worldwide – in places like Europe, the USA, Australia, and the UK. It provides a four interest-free payment methods for online purchases to its customers.

Different from other ‘Buy Now, Pay later’ Services

Klarna’s Buy now, pay later feature is available to customers via its shopping app directly. Unlike other traditional BNPLs, Klarna focuses on providing customers with smooth and flexible payments. Other BNPL services like Zip or AfterPay have partnerships with some particular retailers. However, Klarna works a bit differently. The company boasts that it can be used at any online retailer, whether or not they are included in the app. Additionally, Klarna keeps customers up to date with store sales and promotions and allows customers to create a “wish list” of items they want to purchase and choose to receive price drop alerts when they are in stock. Customers can also save items from their favourite retailers, share their collections with others, and much more.

Features associated with Klarna

  1. When shopping with Klarna, users are not limited to a strict credit limit. Instead, the amount of money they have will depend on the results of their credit check. 
  2. Whether or not Klarna performs a credit check depends on which retailer customers shop for and how much they want to borrow. They are more likely to perform a credit check if customers plan to finance a more significant purchase in the long run.
  3. Customers can shop a little differently at the Klarna store and online. They can use Klarna as a payment option anywhere from physical stores to shows and pop-up shops. Klarna is unique in its ability to pay with the app, even if the retailer does not use it as a payment option.

The pros of Klarna 

  • Customers can still shop even when cash flow is tight

Customers can spread out payment plans by splitting the total amount into four payments. These payments are then automatically charged on their debit card or credit card.

  • All purchases are interest-free, and there is no paid subscription

No interests occur, and there is no monthly, quarterly, or yearly subscription.

  • Easy and simple application process

Users simply need to create an account (username and password) and provide relevant personal details and bank information.

The cons of Klarna

  • Risk of accumulating a higher debt that is unaffordable

Customers might spend money they do not have. This is one of the reasons that cause a significant debt to some customers.

  • Charge late fees

Late fees are only charged when customers do not have enough money in their transaction account by the due date. Also, this is one of the revenues for BNPL providers – Klarna.

Will you shop with Klarna? How does Klarna differ from other alternative companies?

-Chor Wah (Thomas) Tang, Monash University

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